Blackstone, SoftBank Deals Put Saudi Wealth Fund on the Map

  • Public Investment Fund may eventually control over $2 trillion
  • Saudi fund invested $3.5 billion in Uber Technologies in 2016

PIF managing director Yasir Alrumayyan, right, with SoftBank CEO Masayoshi Son, center.

Saudi Arabia plans to expand its sovereign wealth fund into the world’s largest. The kingdom took a huge step toward that goal on Saturday when it signed billions of dollars of deals with Blackstone Group LP and SoftBank Group Corp.

The Public Investment Fund, or PIF, is at the center of Saudi Arabia’s efforts to diversify revenue away from oil under an economic transformation plan known as Vision 2030. The fund could eventually control more than $2 trillion, according to Deputy Crown Prince Mohammed bin Salman. The sale of a less than 5 percent stake in oil giant Aramco to the public will provide funds for investment.

“We want to be an investment powerhouse,” PIF managing director Yasir Alrumayyan said in a rare public appearance Saturday during an event that gathered top Saudi officials and American corporate titans, including JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon and Citigroup Inc. CEO Mike Corbat, in Riyadh. “Most of the investments we announced and will announce soon are international, but they will be in parallel with our investments in Saudi.”

The PIF’s dealmaking has quickened this year as it seeks to increase the proportion of foreign holdings to 50 percent from 5 percent, excluding Aramco. Here’s some of the fund’s biggest investments so far:

Blackstone Infrastructure Fund

The PIF agreed to commit $20 billion to an infrastructure investment fund with Blackstone, the world’s biggest private-equity manager. Blackstone plans to raise the same amount from other investors and with leverage, the New York-based asset manager expects to have more than $100 billion in purchasing power for infrastructure projects, primarily in the U.S. The agreement is non-binding and terms are still being negotiated.

The potential investment reflects the PIF’s “positive views around the ambitious infrastructure initiatives being undertaken in the United States as announced by President Trump,” and will allow the PIF to “achieve long-term returns given historical investment shortfalls,” Alrumayyan said.

SoftBank Vision Fund

Saudi Arabia and SoftBank formally announced the first close of fundraising for the largest-ever technology investment fund on Saturday. More than $93 billion has been secured from backers led by the PIF and the Japanese company, and the fund could grow to $100 billion. The PIF didn’t disclose the size of its investment, but bin Salman agreed to potentially invest up to $45 billion in the fund over five years after a meeting with SoftBank’s Masayoshi Son. Apple Inc., Qualcomm Inc., Foxconn Technology Group and Sharp Corp. also put in capital.

“We are building a portfolio that is diversified across sectors, asset classes and geographies, and expect the Vision Fund to act as a platform to access a range of exciting, emerging opportunities in the technology sector,” Alrumayyan said in a statement announcing the deal.

Uber Technologies Inc.

The PIF invested $3.5 billion in U.S. ride-hailing company Uber Technologies Inc. last June, marking its arrival as a major global investor. The deal valued Uber at $62.5 billion and gave Alrumayyan a board seat at the San Francisco-based company.

To learn more about the Public Investment Fund, click here.

Saudi Arabian Military Industries

The PIF earlier this month set up a defense company -- Saudi Arabian Military Industries, or SAMI -- to help reduce the kingdom’s reliance on foreign purchases of military equipment and create a domestic manufacturing industry.

The wealth fund said SAMI will directly contribute around 14 billion riyals ($3.7 billion) to the Saudi economy by 2030, invest more than 6 billion riyals in research and development and create over 40,000 jobs in the engineering and technical fields.

“SAMI is a big thing,” Alrumayyan said. “We are the third-largest spender on military in the world so by 2030 we want to bring in 50 percent of our procurement into Saudi Arabia.”

Mohamed Alabbar

The PIF was among investors contributing to start Middle East e-commerce venture Noon last November. Led by Dubai-based business tycoon Mohamed Alabbar, the fund pledged to invest $500 million -- half of Noon’s capital -- and will be an active participant in its board.

The Saudi fund deepened ties with Alabbar, who is also chairman of Dubai’s largest real estate developer Emaar Properties PJSC, later that month when it took a 50 percent stake in his investment vehicle Adeptio AD Investments SPC Ltd. Adeptio bought Kuwait Food Co., which operates KFC and Pizza Hut restaurants in the Middle East and North Africa.

Posco

The PIF’s investment in Korea’s Posco Engineering & Construction Co. was one of the fund’s first overseas deals. The fund paid $1.1 billion for a 38 percent stake and got the right to appoint two board members.

At Home

Domestically, the PIF has listed assets worth about $106 billion, including stakes in companies such as Saudi Basic Industries Corp., the world’s second-biggest chemicals manufacturer, and National Commercial Bank, the kingdom’s largest lender. In addition. the fund owns about 60 private companies, Alrumayyan said at the Riyadh conference. The fund’s assets totaled 587 billion riyals ($157 billion) at the end of June 2016, according to the prospectus for the government’s $9 billion Islamic bond sale published in April. The transfer of about $27 billion from the kingdom’s foreign reserves held at the central bank to the PIF was approved in November.

The government also plans to transfer ownership of many state assets to the fund while they are being privatized, including the Saudi stock exchange and flour mills. The PIF is the main investor in a planned 334 square-kilometer sports and entertainment city that will be built south of Riyadh, the government said in April. The plans will include a safari area and a Six Flags Entertainment Corp. theme park.

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